An analysis of the mining industry during the first three years of the Benigno Aquino administration

1. Gradingthe Aquino Administration’s Scorecard on Mining
After almost three years into the Aquino administration, opposition from local
government units, civil society organizations, environmental lobbyists,
indigenous peoples, and separatists groups remains unabated and continues to
hound the mining industry. While the industry looks to the government for
much-needed relief, it seems that the efforts exerted by the Aquino
administration can be considered as half-hearted.
During the run-up to the 2010 presidential elections, Allan and Associates, a
Hong Kong-basedsecurity risk management consultancy, made an assessment on
the implications of an Aquino presidencyfor the mining industry. The
assessment raised the prospect that Aquino would rely heavily on popular
support rather than pursue coherent strategies intended to provide long-term
economic and social stability because of his perceived close links with
‘progressive’ elements within the Catholic Church and civil society groups.
According to a Green Electoral Initiative survey led by EcoWaste Coalition and
Greenpeace in February 2010, Aquino was inclinedto review Republic Act
7942otherwise known, as the “Philippine Mining Act of 1995”particularly the
fiscal incentives in order to maximize the economic benefits from the extractive
industry.
In fact during the Foreign Correspondents Association of the Philippines
Presidential Forum on 17 October 2012,Aquino confirmed that he didn’t have
the confidence that existing laws adequately protect the environment and the
governmentgets its just share from the mining industry. When asked point blank
if he favors mining, Aquino respondedthat the benefits of mining were one-sided
in favor of the mining companies stating that:"Extraction is a one-shot deal with
attendant risk, there are several risks. And in terms of revenues generated, it is
less than 10%. So our people seem to be getting the maximum risk but the least
in terms of benefits. And we want to correct that situation."
Under Aquino’s watch, the Department of Environment and Natural Resources
(“DENR”)enacted a use-it-or-lose it policy in 2011 to force inactive permit
holders to complywith their submitted work programs or risk voiding their
contracts, and implemented a moratorium on new mining applications. The
moratorium on new mining applications was lifted andthe Mines and
Geosciences Bureau (“MGB”) accepted and processed new mining applications
starting on 18 March 2013. MGB Administrative Order 2013-10 set the guidelines
for the new mining applications and increased the mining application fee from
Php60 per hectare to Php300-500 per hectare. Resource developers are also
reeling from the effects of the revised free and prior informed consent
guidelines,which theNational Commission on Indigenous Peoples published on
16 May 2012 (NCIP Administrative Order No. 3, Series of 2012)prompting the
mining industry to air its concerns and argue that the new rules have severe
impact on mining investments.Also, despite the administration’s move to
address certain loopholes in the Mining Act with Executive Order No. 79, the rules
on mining remain unclear according to some industry players and stakeholders.

2. There areindeed concerns that Aquino’s links with civil society groups resulted
in an anti-mining administration that has passedregulations hostile to the
industry.Amado Macasaet, writing for the newspaper Malaya, thinks that the fact
that Aquino allowed the South Cotabato provincial board resolution to prevent
the $5.9 billion gold-and-copper project of Xtrata Plc from starting operations
wasadmission that he is anti-mining. To Macasaet, the environmental clearance
certificate (“ECC”) issued by the DENR is “a useless piece of paper” because the
project continues to be stymied by a provincial ordinance banning open pit
mining whilethe governor stands pat on the resolution of the board.
Nevertheless, following DENR’s decision to issue an ECC to Xtrata’s and
allowPhilex to resume its operation in Benguet after the mine tailings accident,
civil society groups were up in arms against the Aquino administration.In a press
release dated 15 March 2013, the Kalikasan People’s Network for the
Environment stated that environmental groups are shocked in the series of
decisions made by DENR and Malacañang allowing foreign and corporate miners
to expand large-scale mining operations in the country.
On the other hand, the Alyansa Tigil Mina (“ATM”),an advocacy group on
environmental and human rights issues, insists that under EO 79, there is no
premium given to the right of local governments and the opposition of mining-
affected communities to resist large-scale mining operations in the country.ATM
is seeking to revise the current mining policy framework, which according to
ATM is aggressively promoting liberalization of the mining industry resulting to
widespread environmental destruction and violation of human rights.
2013 Midterm Elections
President Aquino suggestedthat the mining industry would have to wait for the
amendments to the mining law as a more prudent way to undertake the
government’s relationship with the industry in generaljustifying that he is not
risking the environment, the health of Filipinos and the loss of resources for
some temporary gain. In light of the 2013 midterm elections, the industry is
closely analyzing how senatorial candidates are positioning themselves on
mining issues and how interest groups support certain candidates on account of
their stand on these issues.
ATM is calling on candidates to support the passage of the Alternative Minerals
Management Bill that seeks to revise the current mining industry framework.The
group declared that it would campaign against at least four (4) senatorial
candidates – former senator Richard Gordon and newcomer Jack Enrile, son of
Senate President Juan Ponce Enrile, who are both from United Nationalists
Alliance, and Representatives Sonny Angara, and Cynthia Villar who are now
running under Team PNoy.Villar’s family owns Queensberry Mining, which is
directly involved in the King-king copper-gold project in Compostela Valley.
Angara is a member of the board of directors of Aurora Pacific Ecozone and
Freeport Authority, while Gordon is an independent director of Atlas Mining
Corp. Enrile hails from Cagayan “where anti-mining advocates are threatened
and some killed,” according to the ATM.
On the other hand, the Makabayan coalition, made up of left-leaning party-list

3. groups -Bayan Muna, Anakpawis, Gabriela, ACT Teachers, Katribu, Migrante,
Courage, Akap Bata, Piston and Kalikasan has also joined the fray in endorsing
supposedly anti-mining senatorial candidates.With Makabayan's own candidate,
Bayan Muna party-list Rep. Teodoro Casiño, the bloc will be supporting the
candidacy of Senators Francis Escudero, Aquilino Pimentel III and Loren
Legarda, former Las Piñas Representative Cynthia Villar and Grace Poe-
Llamanzares.Satur Ocampo, Makabayan President, said that the six candidates
have agreed to push for pro-people mining policies and environmental
protection.
Jamby Madrigal stands out for having sponsored senate bills on the repeal of the
Mining Act. The Catholic Bishops Conference of the Philippines also came out
with a list of candidates who are amenable to the passage of an Alternative
Minerals Management Bill. Among those in the list are Richard Gordon, Ed
Hagedorn, Mitos Magsaysay and Migs Zubiri.
Mining Act Revisited
Nine years after the Supreme Court ruled that Mining Actwasconstitutional,the
Court is once again reviewing petitions assailing its legality. During oral
arguments held on16 April 2013,the SC tackled issues raised by petitioners
headed by then Akbayan partylist Rep. Risa Hontiveros, Bayan Muna party list
Rep. Teddy Casiño and House Deputy Speaker and Quezon Rep. Lorenzo 'Erin'
Tañada IIIof the ruling Liberal Partyof President Aquinoon the validity of
sections 80 and 81 of the Mining Act. Surprisingly, feuding party-list groups
Bayan Muna and Akbayan set aside their differences and agree to unite in their
petition.
The petitioners argued that both are unconstitutional because they foster
inequitable sharing of wealth. Sec. 80 limits the share of the government in
Mineral Production Sharing Agreement (“MPSA”) to excise taxes while Sec. 81
confines government's share to taxes, fees and royalties instead of letting it have
full control over the exploration, development and utilization of mineral
resources.The petitioners also sought a temporary restraining order that would
stop the DENR from acting on MPSA applications, and asked the SC to cancel the
MPSAs of Hallmark Mining Corporation and Austral-Asia Link Mining Corp in
Davao Oriental.
The DENR argued that the petitions should be dismissed outright because the SC
had already ruled on the constitutionality of the Mining Act in the December
2004 decision of the High Court in La Bugal-B'laan Tribal Association v. Ramos.
Newly appointedJustice Marvic Leonen inhibited from the case because he was a
petitioner in theLa Bugal case.
The Next Three Years?
The industry may have been resigned to the fact that it could well be the next
President who will be more supportive of mining.Adding to this resignation is
the draft order that the administration is considering to tighten mining rules, cut

4. tax breaks, review resource contracts, introduce competitive bidding for mining
rights, widen a ban on mining to more areas, mandate downstream processing of
minerals, ban direct shipping of raw or unprocessed strategic metallic ores, and
demand economic valuations before allowing projects to proceed.The draft order
reeks of resource nationalism as the Philippine government moves beyond
taxation by introducingadditional requirements affecting the commercial
feasibility of mining projects.
It is no consolation too that Aquino may justify his tightening on the industry
knowing fully well that the impressive growth rates in the economy recently
affirmed by the much-coveted and long-awaited investment grade rating was
made possible even without the contribution from big ticket mining projects.
As the nation goesto the polling booths for the mid-term elections with certain
candidates having an alternative mining bill limiting foreign ownership in their
platformsof government and the SC reexamining the Mining Act, the industry
waits with bated breath the outcome of these developments.
Fernando “Ronnie” Penarroyo is the Managing Partner of Puno and Penarroyo Law
Offices (fspenarroyo@punopenalaw.com). He specializes in Energy, Resources and
Environmental Law, Business Development and Project Finance. He is a trustee of
the Philippine Mining and Exploration Association, Inc.He was a volunteer lawyer
for Noynoy Aquino during the 2010 presidential elections.